Iyoboyi M, Jalingo U, Tsauni A. 2016. Impact of Institutions on Macroeconomic Performance in Nigeria: 1980-2013. Eastern European Business and Economics Journal 2(3): 193-221.
Full text (coming soon)
Mohamed Reda ABONAZEL, Institute of Statistical Studies and Research, Egypt;
Mohamed BEN MIMOUN, Umm Al-Qura University, Saudi Arabia;
Gerasimos SOLDATOS, American University of Athens, Greece;
Blanka ŠKRABIĆ PERIĆ, University of Split, Croatia.
In this paper, the Vector Error Correction Model was used to investigate the impact of institutions on macroeconomic performance in Nigeria for the period 1981-2013. Data were drawn from secondary sources. Three institutional measures were employed in the study, namely contract intensive money, revenue source volatility and quality of service delivery. Accounting for structural breaks in the series, a long-run equilibrium relationship was found between the macroeconomic performance and institutional indicators. Short-run bidirectional causality between institutions and Nigeria’s macroeconomic performance was found. There is evidence of long-run unidirectional causality from revenue source volatility to macroeconomic performance and bidirectional causality between macroeconomic performance and contract intensive money, and between macroeconomic performance and the quality of service delivery. The institutional indicators were found to be endogenous. Property rights institutions should be improved through financial deepening. There is need to diversify the economy and improve the quality of service delivery through adequate provision of electricity.
causality, cointegration, impulse response functions, institutions, variance decomposition, vector error correction model
O14, O25, E61, E63
Abdel-Latif, A., & Schmitz, H. (2009). State-Business relations and investment in Egypt. IDS Research Report, 61, Brighton, Institute of Development Studies, Retrieved May 12, 2016 from http://www2.ids.ac.uk/futurestate/pdfs/RR61.pdf
Acemoglu, D., Johnson, S., & Robinson, J. (2002). Reversal of fortune: geography and institutions in the making of the modern world income distribution. Quarterly Journal of Economics, 117(4), 1231–1294.
Ayres C. (1962). The theory of economic progress. A study of the Fundamental Economic Development and Cultural Change. New York: Schocken.
Bakare, A. S. (2013). Investment climate and the performances of industrial sector in Nigeria. International Journal of Academic Research in Business and Social Sciences, 3(10), 11–21.
Benyishay, A., & Betancourt, R. (2010). Civil liberties and economic Development. Journal of Institutional Economics, 6(3), 281–304.
Cammack, D., & Kelsall, T. (2010). Developmental patrimonialism. The case of Malawi. Working Paper 12, African Power and Politics Programme. Retrieved July 19, 2011, from http://www.institutions-africa.org/page/ publications.
Central Bank of Nigeria (various issues). Statistical Bulletin. Abuja, Nigeria.
Chowdhury M. T. H., Ulubaşoğlu, M. A., & Bhattacharya. P. (2013). An empirical inquiry into the role of sectoral diversification in exchange rate regime choice. European Economic Review, 67, 210–227.
Doucouliagos, C., & Ulubasoglu, M. A. (2006). Economic freedom and economic growth: Does Specification make a difference? European Journal of Political Economy, 22(1), 60–81.
Ekpo, A. H. (2013). Rethinking Institutions and economic development: Is there any framework? Paper presented at the 54th Annual Conference of the Nigerian Economic Society (NES), Abuja, Nigeria, September 17-19.
Engle, R. F., & Granger, C. W. J. (1987). Cointegration and error correction: representation, estimation and testing. Econometrica, 55, 251–276.
Fao, R. (2008). Social institutions and human development. Social Development Working Papers, Paper no. 006, July, Retrieved April 10, 2016 from http://www.academia.edu/1850049/Social_Institutions_and_Human_Development
García-Belenguer, F., Santos, M. S. (2013). Investment rates and the aggregate production function.European Economic Review, 63, 150-169.
Groenewold, N., & Tang, S. H. K. (2007). Killing the goose that lays the golden egg: Institutional change and Economic Growth in Hong Kong. Economic Inquiry, 45(4), 787–799.
Hall, R. E., & Jones, C. I. (1999). Why do countries produce so much more per worker than others. Quarterly Journal of Economics, 114(1), 83–116.
Hodgson, G. M. (2006). What are institutions? Journal of Economic Issues, 40(1), 1–25.
Johansen, S., Mosconi, R., & Nielsen, B. (2000). Cointegration analysis in the presence of structural breaks in the deterministic trend. Econometrics Journal, 3, 216-249.
Knack, S., & Keefer, P. (1995). Institutions and economic performance: cross-country tests using alternative institutional measures. Economics and Politics, 7(3), 207–228.
Knowles, S., & Weatherston, C. (2007). informal institutions and cross-country income differences. CREDIT Discussion Paper no. 06/06, Retrieved July 23, 2016 from https://www.nottingham.ac.uk/credit/documents/papers/06-06.pdf
Lahiri, W., & Véigh, C. A. (2001). Living with the fear of floating: an optimal policy perspective. NBER Working Paper No. 8391, Retrieved August 2, 2016 from http://www.nber.org/papers/w8391.pdf.
Lewis, A. (1955). The Theory of Economic Growth. London: George Allen and Unwin.
Liew, V. K. (2004). Which lag length selection criteria should we employ? Economics Bulletin, 3(33), 1–9.
Lütkepohl, H., & Saikkonen, P. (2000). Testing for the cointegrating rank of a VAR process with a time trend. Journal of Econometrics, 95(1), 177–198.
Mauro, P. (1995). Corruption and growth. Quarterly Journal of Economics, 110(3), 681–712.
Menard, C., & Shirley, M. M. (2005). Introduction. In Menard, M.S.C. (ed.), The Handbook of New Institutional Economics. Springer.
Michael, A. A., & Babasanmi, B. O. (2004). Institutional framework, interest rate policyand the financing of theNigerian manufacturing sub-sector. In the Proceedings Africa Development and Poverty Reduction. The Macro-Micro Linkage Forum, Lord Charles Hotel, Somerset West, South Africa 13-15 October, 2–36.
Narayan, P. K., & Smyth, R. (2004). The relationship between the real exchange rate and balance of payments: empirical evidence for China from co-integration and causality testing. Applied Economic Letters, 11, 287-291.
North, D.C. (1990). Institutions, Institutional Change and Economic Performance. New York: Cambridge University Press.
Osabuohien, E. S., Beecroft, I., Uchenna, E. R., & Oluwatobi, S. (2013). Does everything rise and fall on institutions? Sectoral Analysis of Socioeconomic Transformation in Nigeria. Paper Presented at the 54th Annual Conference of Nigerian Economic Society on “Institutions, Institutional Reforms and Economic Development”, 17-19th September, Sheraton Hotels and Towers, Abuja.
Ozcicek, O., & Mcmillin, W. G. (1999). Lag length selection in vector autoregressive models: Symmetric and asymmetric lags. Applied Economics 31(4), 517–524.
Perron, P. (1997). Further evidence on breaking trend functions in macroeconomic variables. Journal of Econometrics, 80, 355-385.
Perron, P., & Vogelsang, T. J. (1992). Nonstationarity and level shifts with an application to purchasing power parity. Journal of Business and Economic Statistics,10, 301–320.
Rodrik, D. (1999). Where did all the growth go? External shocks, social conflict and Growth collapses. Journal of Economic Growth, 4(4), 385–412.
Smith, A. (1776). The Wealth of Nations. Random House Inc., USA, 2000.
Trenkler, C., Saikkonen, P., & Lütkepohl, H. (2008). Testing for the cointegrating rank of a var process with level shift and trend break. Journal of Time Series Analysis, 29(2), 331–358.
Ubi, P. S., Effiom, L., & Baghebo, M. (2012). The dynamics of institutional failure and its implications on employment capacity of the nigerian economy.Journal of Emerging Trends in Economics and Management Sciences, 3(6), 931–939.
World Bank (2014). World Development Report, Washington DC: World Bank.